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What are the Indian government’s aims and purposes?

A good friend had forwarded this article written by the OSD to a Member of Parliament in India. I am in agreement with the philosophical message of the article. I like the style and the GIFs. They lighten the atmospherics and reduces scope for bitter polemics.

Indeed, there is a tendency on the part of the government – as has been the case with past governments and nowdays, in other countries – to take short cuts. They are necessitated in large part, by the bitter partisan politics. Democratic norms are flouted by either side of the aisle. But, the criticisms are directed only at those with whom one is ideologically opposed. But, at the same time, the situation, overall, erodes government accountability.

In India, the Rajya Sabha has not been allowed to function. It is in a permanent filibuster mode. Yes, some exceptions were there in one particular session of the Parliament – was it in the February – April 2015 period that several Bills were passed? My recollection is not strong.

Other than that, it is in a permanent lockdown mode. It is neither debating nor rejecting legislations. So, one bad behaviour seems to beget another.

But, that does not address the issue of why no debate was even allowed to take place in the Lok Sabha, by circulating documents at the eleventh hour. That is undemocratic and dangerous.

But, the author has also been very clever in taking some slight liberties with truth – not outright distortions but some liberties.

I deal with specific issues below.

Contributions to political parties

(1) The possibility of making unlimited anonymous donations if made by cheque or through the Electoral Bonds was implicit in the paragraph 165 of the FM’s Budget Speech made on Feb. 1, 2017

There was also a mention of 100% tax exemption for donations made to trusts set by political parties as pass-through funding vehicles in the Budget Speech for 2009-10 (paragraph 98) delivered on July 6, 2009:

98. The House will agree that it is desirable to bring about transparency in the funding of political parties in the country. With a view to reforming the system of funding of political parties, I propose to provide that donations to electoral trusts shall be allowed as a 100 per cent deduction in the computation of the income of the donor. For this purpose, Electoral Trusts will be such trusts as are set up as pass-through vehicles for routing the donations to political parties and are approved by CBDT. [Link]

The important thing is that the then Finance Minister Pranab Mukherjee did not specify any monetary ceiling either, for availing of this exemption.

But, the anonymous nature of the electoral bonds is a matter for discussion, even though this government can argue that it has only further extended the situation already in force, arising out of the budget document 2009-10.

In this regard, notice that the anonymity was always available to companies if the donation was made to ‘Electoral Trust Companies’ which were pass-through vehicles for political parties, as envisaged in the Budget document presented in July 2009 for 2009-10. See the government clarification here, issued on December 10, 2013.

Also, this link will show clearly what the Amendment to the Finance Bill removes in the existing provisions of the Section 182 of the Companies Act, 2013. To see that, you have to open the ‘Amendments to the Finance Bill’ document (link) and see page 5.

But, while this government is only further extending the non-transparency afforded by the previous government, it can and should be faulted for not moving in the opposite direction of greater transparency. Indeed, it reinforces the non-trasparency.

Second, the information of the donation made through account payee cheque is available with the bank and hence can be requested by the government (and the political party) in office, through the taxman. In that sense, the information can still be used to threaten or extract more favours from the company or pursue vindictive action against them, as the case may be.

That is not necessarily the underlying purpose of seeking to ban cash transactions.

The proposed amendments do not affect information (and may even strengthen it) available to the taxman and the government but it does nothing to improve transparency of funding and hence, transparency of governance. Clearly, it deals a setback by extending the anonymity available for donations to ‘Electoral Trust Companies’ to donations made directly to political parties.

Therefore, I would deem this a fair criticism of the government’s move.

Merger and Consolidation of Tribunals

(2) On the merging of tribunals, the Finance Minister had made a mention if it in his speech (paragraph 128).

So, the author is wrong in saying that “he did not utter a single word about the provisions on making Aadhaar mandatory for income tax filing or the merging of tribunals”. So, some sloppy homework on his part.

But, that said, the FM mentioning it in his speech does not preclude a discussion on the same, on the rationale for the actual scheme of merger and consolidation of tribunals, etc.

Further, the discussion of the issues surrounding the Union government taking over the power to appoint the office bearers of the tribunal, prescribe their qualifications, terms of appointment including salary, tenure, etc., are theoretically correct. See here.

But, I am not sure how, in practice, they differ from the status quo. After all, the government is a litigant and makes rules in many areas. There is a conflict of interest in many areas. That is in the nature of things.

The Acts may prescribe the Tribunal’s formation, its powers and the terms of appointment of the members of the Tribunal, prescribe their qualifications, etc., but, in the end, the selection of personnel has always been made by the Government. So, in reality, what has changed materially?

All the same, happy and grateful to be educated if I am missing something here.

Search and Seizure

(3) On the ‘Search and Seizure’ without disclosing source, they were mentioned in the Finance Bill as originally introduced in the Lok Sabha on Feb.1, 2017. The insertions were by way of ‘Explanation’ and they were necessitated because some judicial pronouncements introduced some ambiguity.

I had blogged on it here and it clarifies the situation. In short, nothing has changed and nothing new has been created.

Overall impression

There may be a justification – partial – for introducing several things as a Money Bill. All the same, it is a unhealthy state of affairs. Read my column on what Mexico did in 2012-13. That is healthy democratic practice, in my view. Further, even as a Money Bill, not allowing scope for discussion even in the Lok Sabha is not healthy democratic practice at all.

Further, the issues of donations of corporations to political parties must go for wider consultation before amendments are made and certainly, not rushed through like this.

These changes, together with the government’s thrust on digitisation actually are troubling: Digitisation will not do much to expand the underlying economic activity. But, it would make available and concentrate information with the government and with tax authorities.

That would offer tremendous scope for abuse and vindictiveness. Mere promises to refrain from such abuse and vindictiveness would not cut it. Even if credible and implemented, these promises are not bearer instruments and not hence are not transferable whereas laws, rules and regulations are seemingly in perpetuity.

Together with the government’s obsession on digitisation and gathering of information, I am worried as to the underlying intent of the Note ban move, especially that there seems to be no hurry to withdraw the Rs. 2000 Note. Was the move meant to address informality or meant to gather information? The implications of either are rather different for the country and for its political and economic governance. Some of these concerns informed my MINT column of Tuesday.

Post-script:

Some friends forwarded me an article by Mihir Sharma for Bloomberg and said that there was a convergence of views between him and me. I cringe actually. He is politically motivated. He cannot find anything redeeming in what this government does. This is neither informed nor constructive criticism. The real issue is not the use of Money Bill route to push through legislative agenda that cannot be considered part of ‘Money Bill’. Second, he is completely wrong about the ‘Search and Seizure’. I had explained this above and also blogged on it before.